New California Law Requires Insurer Reports on Use of Minority-, Women-, and Disabled Veteran-Owned Businesses

California Governor Jerry Brown has signed Assembly Bill 53 expanding insurers' reporting requirements. Existing law already requires each admitted insurer to provide information to the Insurance Commissioner on its community development investments in California. The new law, authored by Assembly Member Jose Solorio (D-Santa Ana) and strongly supported by Commissioner Dave Jones and the California Department of Insurance (CDI), requires admitted insurance companies to report specifically on efforts to procure goods and services from minority-, women-, and disabled veteran-owned businesses.

Under the new law, each insurance company with written premiums of $100 million or more in California must file a report by June 1, 2013 outlining its procurement efforts regarding minority-, women-, and disabled veteran-owned businesses. The report must contain detailed information specified in the statute. It must also designate an individual whom enterprises can contact if they want to become suppliers to the insurer. The reports will be accessible to the public through the CDI website for informational purposes. Failure to file the report by July 1, 2013 subjects the admitted insurer to civil penalties to be fixed and enforced by the Commissioner.

There are exceptions to the reporting requirements. An insurer that does not enter into contracts to procure goods or services in California can satisfy its obligation by filing a statement with the Commissioner attesting to that fact. And an insurer that is a member of an insurance holding company system is not precluded from complying with the reporting requirement by making a filing on behalf of the entire group of affiliated companies.

The new law also requires, among other things, that commencing July 1, 2015, each eligible admitted insurer biennially update its supplier diversity report and submit a new report with additional information by July 1. It further requires that the Commissioner establish and maintain a link on the CDI website that provides public access to the contents of each admitted insurer's report. The provisions of the new law will sunset on January 1, 2019.

In a related matter, Insurance Commissioner Jones announced the formation of an Insurance Diversity Task Force in January 2012 to consider and make recommendations about diversity in the insurance industry. In keeping with the Commissioner's agenda on diversity, the CDI and the Insurance Diversity Task Force are hosting a summit on October 9, 2012 to discuss diversity issues and to solicit information from interested parties. More than 200 insurance companies have been invited to participate in the conference, along with a host of stakeholders and small-business owners. The summit will take place at the Loker Conference Center, California Science Center, 700 Exposition Park Drive, Los Angeles, from 1:00 p.m. to 5:30 p.m. Phyllis Marshall of Manatt's Sacramento office, who has been appointed by the Commissioner, serves on the Diversity Task Force. If you need further information regarding AB 53 or the Insurance Diversity Summit, please contact Phyllis Marshall at pmarshall@manatt.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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